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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR.
Before: SH. RAVISH SOOD & DR. M. L. MEENA
IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR. BEFORE SH. RAVISH SOOD, JUDICIAL MEMBER AND DR. M. L. MEENA, ACCOUNTANT MEMBER I.T.A. No. 596/Asr/2018 Assessment Year: 2015-16
Sant Mahesh Muni Ji Vs. The Income Tax Officer Borewale Welfare Society (Exemptions), Gaushala Neharwali, VPO- Ward, Jalandhar Badhani Kalan, Distt. Moga [PAN: AAETS 9637D] (Appellant) (Respondent)
Appellant by : Sh. Ashray Sarna, C.A. Respondent by: Sh. Trilochan Singh PS Khalsa, DR
Date of Hearing: 24.12.2021 Date of Pronouncement: 21.02.2022
ORDER Per Dr. M. L. Meena, AM: The appeal has been filed by the Assessee against the impugned order dated 28.09.2018 passed by the Ld. Commissioner of Income Tax (Appeals)-4, Ludhiana, for the Assessment Year 2015-16.
The assessee has raised the following grounds of appeal: “1. The orders passed by the Assessing Officer and Ld. Commissioner of Income Tax (Appeal) vide orders dated 26.12.2017 and 28.09.2018 respectively are illegal, uncalled for and against the law & facts. 2. Ld. Commissioner of Income Tax (Appeal) has sustained the additions merely on conjectures and surmises without any legal basis. 3. The Ld. Commissioner of Income Tax (Appeal) has wrongly sustained the additions on the ground that Assessee has failed to explain the amount of
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investment made out of set apart funds funds in the income tax return as well as in the audit report and in Form 10. However, the details have already been filed in the audit report and Form 10 available with the Assessing Officer that investment has already been made as per specified mode u/s 11(5) of the Income Tax Act, 1961. 4. That the Ld. Commissioner of Income Tax (Appeal) has not considered ground no. 3 recreated as below: - The authorities below has erred in law and facts and circumstances in the absence of any specific time limit prescribed under section 11(2) of Income Tax act, 1961 for submission of the notice in the prescribed manner to the assessing authority and in the absence of any express or by clearly implied delegation to the rule making authority of any power to impose time limit. Such time limit prescribed in the rule 17 for submission of Form no. 10 by rule making authority is invalid. 5. The assessee craves leave to argue on any other question of law or facts at the time of hearing of this appeal.”
Facts as record are that the assessee society is registered u/s 12AA of Income Tax Act. During the year under consideration, the assessee has shown total receipts at Rs.2,02,20,843/-. The Assessee has utilized Rs.1,00,78,760/- (Revenue Expenditure + Capital Expenditure) of the total receipts as against Rs.1,71,87,716/- being 85% of the total receipts. Thus, the assessee failed to utilize 85% of the total receipts, so Ld. AO made addition of Rs.71,17,956/- being amount less utilized by 85% of the total receipts. 3. The Ld. CIT(A) rejected the appeal of assessee by observing that the assessee failed to disclose the amount of Rs.72,50,000/- in Audit Report filed on 19.09.2015 in form 10B as well as in the Return of Income and that the assessee has not given details to satisfy the required condition that the accumulated funds of the year under appeal itself were invested in modes specified u/s 11(5) of the Act. 4. The Ld. Counsel for the assessee submitted that CIT(A) has admitted in the impugned order that assessee has filed Form 10 during the course of assessment proceedings (Page 9). He contended that since there is no provision to file revised return after 809 days or during assessment proceedings and so the assessee could
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declare amount of investment in Income Tax Return as well as Audit Report. Under the circumstances, the assessee only could File Form 10 during assessment proceedings and duly filed so as it was accepted by the Hon’ble CIT(A) as above. Thus, once the Form 10 filed during assessment proceedings stands accepted by CIT(A), has met the requirement to declare amount of investment in Income Tax Return as well as Audit Report as the amount of accumulated funds of the year under appeal itself were invested in modes specified u/s 11(5) of the Act and that the same is evident from the Balance Sheet which were on record with both Ld. AO and Hon’ble CIT(A wherein CIT(A) itself stated Rs1.70 cr has been invested in various banks (Page 9). The written submission file by the Ld. AR on the details of amounts invested in bank accounts of assessee society and justification of the claim thereof is as under: Page 5 of Paper Book where in Balance in Bank Accounts during the relevant year i.e. 31.03.2015: SBBJ-8946 10,40,256/- SBOP-8010 1,46,00,136/- SBOP-DF-7331 8,02,971/- SBOP-SAF-7899 5,67,236/- TOTAL 1,70,10,599/-
Page 11 of Paper Book where in Balance in Bank Accounts during the preceding year i.e. 31.03.2014: Bank Balances 71,59,271/- SBOP-SAF-7833 6,05,982/- SBOP-DF-7731 3,56,585/- TOTAL 81,21,838/-
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Thus there is increase in investment/deposit of Rs.88,88,761/- in Scheduled Bank which is a eligible mode of investment u/s 11(5) of Income Tax Act. Thus all the adverse observations of Ld. AO and Hon’ble CIT(A) are met by the assessee society. Sir, without prejudice to the above it is stated that it is well settled position that income derived from trust property has to be determined on commercial principles and if commercial principles for determining the income are applied, it is but natural that the adjustment of the expenses incurred by the trust for charitable and religious purposes in the earlier year against income earned by the trust in the subsequent year will have to be regarded as application of income of the trust for charitable and religious purposes in the subsequent year in which such adjustment has been made having regard to the benevolent provisions contained in s. 11 of the Act and will have to be excluded from the income of the trust under s. 11(1)(a) of the Act. Thus expenditure incurred in the earlier year can be met out of the income of the subsequent year and utilization of such income for meeting the expenditure of the earlier year, would amount to such income being applied for charitable or religious purposes. Assessee society had excess expenditure incurred in earlier years amounting to Rs,58,78,070/- (last row of pg 6 of CIT(A) order). Thus this excess expenditure incurred by the trust/charitable institution in earlier assessment year could be allowed to be set off against income of subsequent years by invoking s. 11 of Income Tax Act. Sir, the above stated proposition have been decided in favour of the assessee by Hon’ble Supreme Court in the case of CIT(E) v/s Subros
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Educational Society dated 16.04.2018, (2018) 303 CTR (SC) 1, , in which it was held as under: “Charitable trust—Application of income—Excess expenditure incurred in earlier year—Any excess expenditure incurred by the trust/charitable institution in earlier assessment year could be allowed to be set off against income of subsequent years by invoking s. 11—Subros Educational Society (judgment dt. 23rd Sept., 2015 of the Delhi High Court in IT Appeal No. 382 of 2015) affirmed .” Thus considering the facts and circumstances of the case, it is requested that addition made in the hands of assessee may kindly be deleted.
The Ld. DR stands by the CIT(A) order. 6. Heard. Admittedly, the appellant assessee society has filed Form 10 during the course of assessment proceedings [Page 9, CIT(A) order]. It is seen that the amount of accumulated funds for the year under appeal itself were invested in the modes specified u/s 11(5) of the Act as evident from the Balance Sheet which were on record with both Ld. AO and Hon’ble CIT(A) and further CIT(A) itself stated that Rs1.70 cr has been invested in various banks on Page 9 of the impugned order. 7. It is well settled that income derived from trust property has to be determined on commercial principles where adjustment of the expenses incurred by the trust for charitable and religious purposes in the earlier year against income earned by the trust in the subsequent year may be regarded as application of income of the trust for charitable and religious purposes in the subsequent year. Such an adjustment made having regard to the benevolent provisions contained in s. 11 of the Act will have to be excluded from the income of the trust under s. 11(1)(a) of the Act. The contention of the Ld AR that expenditure incurred in the earlier year can be met out of the income of the subsequent year and utilization of
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such income for meeting the expenditure of the earlier year, would amount to such income being applied for charitable or religious purposes is as per law. Thus, the excess expenditure incurred by the Assessee society in earlier assessment years amounting to Rs,58,78,070/- [Pg 6 of CIT(A) order] could be allowed to be set off against income of subsequent years by invoking s. 11 of Income Tax Act. 8. We understand that the Ld. CIT (Appeal) has failed to appreciate the facts of the case and the contentions raised by the appellant before him regarding determination of income on commercial principles by invoking provisions of section 11 of the act in the case of trust and charitable institutions. The addition sustained in mechanical manner merely on conjectures and surmises without consideration of law is not is illegal and unjustified. 9. On similar facts, the proposition of law has been decided in favour of the assessee by Hon’ble Supreme Court in the case of “CIT(E) v/s Subros Educational Society”, (Supra) where it was held that any excess expenditure incurred by the trust/charitable institution in earlier assessment year could be allowed to be set off against income of subsequent years by invoking s. 11 of the act. 10. In the above view, we accept the grievance of the assessee as genuine and as such, delete the addition of Rs.71,17,956/- 11. In the result, the appeal filed by the assessee is allowed.
Order pronounced under Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 by placing the details on the notice board. Sd/- Sd/- (Ravish Sood) (Dr. M. L. Meena) Judicial Member Accountant Member Date: 21.02.2022 *GP/Sr./PS*
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Copy of the order forwarded to: (1) The Appellant: (2) The Respondent: (3) The CIT(Appeals) (4) The CIT concerned (5) The Sr. DR, I.T.A.T. True copy By Order